Picking a world tracking ETF

aroominyork

Surely "sell winners, buy losers" can also be stated as "buy low sell high" which the mantra told to most investors.

Buy low and sell high applies to assets which tend be cyclical in nature such as different regions. As dunstonh has often told us, regions tend to rotate between economic cycles so if the US has done well in the last cycle it might well underperform in the next, and ones which have underperformed may be worth buying low because their day in the sun might be coming. That is different from buying an equal weight in every company including those which are crap and likely to stay so.

If you want to buy low in companies worth owning, you could look at value funds such as PSRW which assesses companies against metrics of sales, cash flow, book value and dividends. However, with its top ten holdings including Alphabet, Apple, Microsoft and Amazon that doesn't solve the tech avoidance conundrum.

masonic

https://forums.moneysavingexpert.com/discussion/comment/82063193#Comment_82063193

It's also problematic because it means you are selling companies from the moment they start rising and buying from the moment they start falling. Fortunes do not tend to reverse so quickly and so you can still end up doing a fair bit of buying towards the top and selling towards the bottom. There would be quite a bit of averaging out I would imagine, and so it is a tilt into smaller companies with the additional volatility they bring, and perhaps some extra returns with it, but definitely more risk.

That said, the VanEck ETF, which is the only one I'm aware of with the track record, and is ethically screened, moved almost in lockstep with the cap-weighted index during most of the 2010s and only really fell behind post-Covid, while gaining back some ground in the last year or so. Interestingly it tracks closer to the ACWI than MSCI World.

PixelPound

https://forums.moneysavingexpert.com/discussion/comment/82063184#Comment_82063184

Most people don't have an investment plan, they open an ISA and start putting money in because they are told it gets the best returns. Often no definite goal, or maybe just a vague one like "enough to retire early", nothing about how to get there.

A plan can be a one page document, you keep on your desktop and maybe a copy with investment papers, useful for keeping you motivated and what to do when there's a lot of noise causing panic. You start with a statement of why you are investing, what the money is for and its goal - doesn't have to be more than a paragraph, but useful for times when investing is boring and you'd like to buy a shiny new car instead.

Then a methodology section, this is what you are invested in (maybe just a global tracker, or maybe some bonds too, could also be a 10% fun section for the stocks or funds that might be more volatile but interests you), how much emergency fund, "dry powder" for use for when there are big dips, and states how much you invest and how often. If you know your character you can also specify when you check your portfolio (if you find yourself checking multiple times a day, then writing down to only check on a sunday and what to do if tempted inbetween) Then you need what will you do if the market falls 20%, 50%, how often to rebalance etc.

How much detail you go into is up to you, but the idea is you are thinking about possible situations with a calm head and no outside stresses, then you can refer to it when there's times you are unsure what to do and might act rashly and irrationally. It's all there in a clear document and decisions to make have been pre-defined.

kempiejon

In my SIPP I used a handful of ETFs for the global regions and gilts, about 50% USA at the kick off and my Europe exUK as I hold FTSE shares directly; partially to balance my UK overweighting but mostly as the only thing I control are fees and it trimmed a bit off charges. It does allow some flexibility and I sweated then swapped half the S&P for a global high yield, still 40% US but less software/IT.

GeoffTF

https://forums.moneysavingexpert.com/discussion/comment/82062844#Comment_82062844

Perhaps I can offer a clearer answer here. You and others seem to believe the US market is more risky than other markets. Only dunstonh has offered a rationale for that: the US currently has a higher volatility than other markets. The market clearly believes that the extra volatility of the US market is compensated by the higher return that it expects the US market to deliver.

The market believes that under-weighting the US will reduce the risk adjusted return. You can reduce volatility by under-weighting the US, as dunstonh has suggested. You can achieve the same volatility by adding some cash to a market weighted portfolio. The market believes that you will receive the higher return by adding cash rather than by under-weighting the US.

aroominyork

masonic and I are having other people's quotes attributed to us. Please all keep an eye on how quotes appear on the screen.

tigerspill

This is something I have been considering, but not sure what fund options might work.

Pretty much all my equities are in FTSE AW trackers. This is my post 15 year bucket, but even then, I am a little nervous of the ratios as is being discussed. Over Christmas I sold quite a few equities to allow me purchase ILGs to see me through the short and medium term - so I am diversified in that respect. We both also have DB pensions.

I am just about to get into this - reducing my US/technology percentage by splitting into a small number of more granular funds.

Would anyone be prepared to make a suggestion for a set of funds that are geographically split that I might start to look at how to break things down a bit? Just looking for a leg up starting point to kick start my thinking.

masonic

https://forums.moneysavingexpert.com/discussion/comment/82063369#Comment_82063369

My rationale for reducing US market exposure is primarily based on valuation and concentration, rather than volatility. I don't think reducing the US component of my equities portfolio will reduce the downside in a crash, but it may enhance forward 10 year returns (contrary to the market's aggregate view). This relies on there being some element of mean-reversion, which will probably happen, but we don't know when.

Mostly I'm targeting geographic spread, where I am comfortable with an upper limit of about 1:1 US/ROW plus satellites. This may mean I leave some money on the table if there is a US-centric AI revolution that benefits the developers much more than the end users. That is what the market appears to be predicting at the moment.

But I have also reduced volatility, and have done this by reducing equities in favour of index linked gilts matched to future liabilities.

masonic

https://forums.moneysavingexpert.com/discussion/comment/82063447#Comment_82063447

"Would anyone be prepared to make a suggestion for a set of funds that are geographically split that I might start to look at how to break things down a bit? Just looking for a leg up starting point to kick start my thinking."

I tend to use justETF to find cheap and large physically backed ETFs covering the main regions (US, Europe, Developed Asia Pacific, Japan, EM). If you need funds, then there are good regional options by HSBC, iShares, and Fidelity, but the cheapest tend to be ETFs these days.

Before doing that, it might be worth checking out the L&G Multi-index series, as these have reduced US exposure and would be simpler to hold if the geographic spread suits you (you could dial down any bias with a mix of one of these with a standard FTSE AW tracker).

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/82063447#Comment_82063447

Is a different geographical split all you are looking for? And do you stick to index funds? If the answer to both is Yes, you just need to decide your regional allocation and then buy the appropriate funds to act as index-satellites around your core AW trackers. Or are you looking for more variance in cap size, sector and style?